Millions of people across the nation are facing home loan defaults and ultimately foreclosure.  The foreclosure epidemic has spread throughout every state because of the slumping home sales and mortgage crisis. One popular option that many borrowers are taking to prevent foreclosure is called a loan modification. This refinancing alternative is becoming more realistic for the “average borrower” because mortgage lenders do not want to take on more properties because it has already almost dried up the liquidity of the banking institutions.  The lending companies have come to realize that keeping the homeowners in their residence actually makes the most sense.  Property values have been declining so fast, that the banks will lose more money if they let the foreclosures continue to occur at such a rapid pace.  Foreclosures can be a very costly process for banks and lenders with the average foreclosure costing the bank about $75,000 to sell the home.  Those are costs that are added to the loss from the real estate depreciation.

A loan modification is a revised agreement, in which the lender modifies the current terms and reduces the monthly payment for the borrower.  The primary objective of a loan modification is to restructure the mortgage to a payment that is affordable for the homeowner. Recent state legislation and Congressional initiatives require lenders to make possible every effort to provide loan modifications to homeowners risking foreclosure.

How can a homeowner be sure that they are receiving the full benefit of a loan modification? First of all, borrowers need to learn everything they can about the process of a bank loan modification. Lenders have set up Loss Mitigation Departments specifically to assist borrowers with this option. There are many companies now offering loan modification assistance for a fee. The problem with these companies is they require a large upfront fee with no guarantee of the outcome.  Until recently, mortgage lenders were not proactive in their efforts to help prevent these mounting foreclosures.  The foreclosure epidemic has caused a rift in many families as the divorce rate has increased significantly in the last two years.